currency market stays volatile across Asian region
STATESMAN NEWS SERVICE
Mumbai, 7 August
The partially convertible rupee had its worst ever start at 61.26 against the United States dollar this morning mainly on account of persisting heavy demand for the American currency from importers. As the dollar demand kept piling pressure on the rupee it slumped more than 65 paise to 61.45/$.
The currency market stayed volatile not only in India but across the Asian region, dealers said. In the later part of the deals, particularly, after the Dalal Street closed for the day, the rupee again fell sharply from intra-day’s high of 60.81/ to close at 61.29/$ a decline of 52 paise or 0.86 per cent vis-a-vis Tuesday’s closing of 60.77/$.
The domestic unit improved in the early afternoon trade amid expectations that the Reserve Bank of India in consultation with the finance ministry officers would soon announce relaxation in the external borrowing or ECB norms to help debt-ridden domestic companies to raise dollars and also increase the flow of foreign investments that has reversed since May.
Continuing heavy demand for the American currency from exporters further eroded the rupee value which reflected in its weaker opening at 61.26/$ against Tuesday’s 60.77/$ closing. However, banks started easing dollar positions at the behest of the central bank which they were told was considering loosening of ECB norms for the corporate sector. Additional dollar liquidity helped the domestic currency to recoup losses.
Forex dealers say the weakness in dollar over the past two days has not helped Asian currencies because equities across the bourses in this region have been under sell-off stress. They point out simultaneous weakening of Thailand’s baht, the Philippines’ peso and Malaysia’s ringgit along with the rupee which, however, remained the worst performer.
Trading on the stock market today was lacklustre although the rupee in currency market was volatile falling and recovering alternately ahead of the scheduled meeting of a high level committee on ECB to revise the existing norms.
The members of the high level committee on ECB are secretary economic affairs, RBI Governor Mr D Subbarao and other departmental heads. The RBI Governor-designate Mr Raghuram Rajan has also been invited as he will be taking over in the first week of September.
The information available with dealers suggests the government and financial regulators have agreed to increase the external commercial borrowing limit for companies from $20 million to $300 million with a maturity period of less than three years.